Victoria slashes and burns (FHBs)

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From the AFR, here is a summary of today’s Victorian austerity Budget:

■ Surplus of $155 million this year building to $2.5 billion in 2015/16

■ Weak forecast of economic and jobs growth

■ Departments required to find a further $180 million in savings

■ Cutting 600 public sector jobs taking total cuts to 4200 over the next two years to save $60 million

■ Increase public sector debt to peak at $40.9 billion

■ 15 per cent increase in fines bringing in $300 million over four years

■ Massive increase in expected dividends from WorkCover and water authorities lifting this financial year from $415 million at last year’s budget to $767 million. For the 2012/13 financial year dividends have increased from $481.8 predicted at last year’s budget to $843.6 million largely thanks to expected dividends from the State Electricity Commission of Victoria

■ Discontinued the First Home Owners Bonus payment to new home purchasers

■ Levy water companies an extra $400 million over four years

■ Workcover premiums to drop from 1.338 per cent of payroll to 1.298 per cent

The Budget shifted it’s key assumptions for revenue downwards too. Growth for 12/13 was cut from 2.5% to 1.75%. Unemployment forecasts were raised from 5.5 to 5.75, which seems pretty silly given it’s currently at 5.8%. For Victoria, such projections can only count on a much lower dollar and no further deterioration in the residential construction pipeline. Brave assumptions.

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The FHB cut will be offset by phased in discounts in stamp duty to new and existing properties, which were announced in the last Budget.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.